My New Investment Plan for a New World


Micro-finance and micro-lending are changing the world as we know it. It’s not just a new way to help the poor. It’s a new way to invest. It’s more stable than the market. It’s almost as lucrative. And it’s not just a good way to live, it’s a smart way too. I’m going “all in.”

The personal problem (for both you and me) with money and time

So, everyone who knows me knows I’m one of those “idea guys.” If you know another “idea guy” you know what this term really translates into. We start projects and never finish them. I really hate that about myself, as most of us do. So, I’ve been on a mission these past few years to hone in on the ways I can be most productive, efficient, and get the most out of my time. Most of us “idea guys” are terribly lousy at managing our time where it counts the most. We have a distorted view of what’s important, especially in the minutia of day to day tasks.

There are a few ideas and passions I’ve held on to over the years, though. One of those is microfinance, specifically starting my own micro-lending company. However, creating what essentially constitutes the equivalent of a bank is pretty difficult to do these days without prior finance and monetary policy knowledge plus experience using some sort of budget software. I knew that even when I interviewed Chris Larsen from back in 2006. I may have ideas, but I’m also a realist.

So, what’s the next best thing? If I can’t do something today, what can I do today that gets me closer to that goal? Well, of course participating in microfinance is definitely an option. With I can (and have for years) lend my money to the organization and in turn the entrepreneurs. In return I get that nice warm fuzzy feeling and maybe a little whuffie. But, I’m also an entrepreneur, so that can’t be all I can do…. can it?

Other options are lending to others where it’s not really microfinance, but more peer to peer lending in the US and the UK. There’s places like (US) and Zopa (UK). I could also simply give money to people anonymously if I’d rather not lend. And I do. I have done each of these at one time or another, and continue to do so.

Why now?

Now, before I share my new plan, I want to mention why I’ve decided this today. Why now?

There’s a few sources of inspiration, but much of it comes from reading The Snowball, a book about Warren Buffett – his life and his business(es). From that book, I’ve been spurred on to think more about the power of compounding interest and what and where to invest. The end of the book also brings to attention the need for doing more than just making money (albeit, this is coming from a guy who has more than he’d ever care to spend). Tangentially, I’ve been considering heavily the Rule of 70 (or 72 if you prefer).

Now, to get past all the financial mumbo jumbo, I’ll get to the point. I’ve tried everything I can think of that’s still honorable (and sometimes even in the gray areas) to make money without going into debt. I’ve not wanted to get into debt because I (personally) usually have a hard time getting out of it. But, that’s usually because I choose risky operations for the money which I borrow. I wouldn’t worry about it so much if I invested my money and time in more stable income-producing operations. But, now I’ve gotten off track again. So, the point is… exponential gain and affiliate marketing.

poof and now you’re gone, I’m sure.

For those of you who are still here… here’s the plan.

The plan

First, let me just say that affiliate marketing has some huge advantages to it. You can start small, risk a little, and when you find a winner of a campaign, scale to where you’re making $1000 per day (profit). Yes, it’s possible. No, I’m not going to sell you a product or anything else. But, just trust me, it can be done both ethically and without much risk.

It also has some very big disadvantages too. There are millionaires who play this game and it’s not for the weak minded or emotional. You will get beat and lose your shirt if that’s you. Don’t go into that game without a lot of study (not buying e-books), consultation, and very small tests at first with money you are perfectly happy to lose. For newbies, you’re speculators. You’re gamblers. Realize that fact until you find the patterns and you’ll not be in the poor house. And last, this kind of work is not the most powerful use of your money. It is not able to be used directly in compounding anything exponentially. So, we need a two-part system.

Now, what I’m going to do is actually take all the proceeds of my affiliate income (since we don’t live on this source of income) and funnel every penny of profit (after taxes) into micro-finance.

But why would you do that if the micro-finance organizations aren’t giving you a return on your investment? (you might ask)

Ah hah! But wait… there is ONE micro-finance organization that actually does pay you interest (right now, and I’m sure there will be more in the future). That one place is was started by the same guy who founded eBay – Pierre Omidyar. The man is not only wealthy and innovative, he’s got a heart the size of … well, it’s really big. The organization is funded primarily by the Omidyar Network and has the right idea.

I’ve just invested in 3 people like Jessica Maria Corea Gutierrez who is a Candy Maker with only $745.00. With this investment, I’ll make %6 annual return (as long they stick to the repayment plan) and help them on their way to becoming self-sufficient.

Jessica Maria Corea Gutierrez

Jessica Maria Corea Gutierrez

Jessica Maria Corea Gutierrez is a candy maker in the small community of San Martin located a few miles outside of Tipitapa. She is a member of a “solidarity group” comprised of two other women. Together they have recently taken out their first loan with NICA Fund partner agency FODEM. Jessica explains that before she took out a loan her situation was “critical”. She lacked the income to be able to afford to pay for all of her children’s shoes and school supplies, which ultimately forced one of her children to have to drop out of school.

Jessica says that with her loan she has been able to purchase larger quantities of the ingredients needed to make her candy such as milk, cinnamon, and vanilla. With increased output she has been able to multiply her candy sales. Now her son is able to return to his studies.

Many members of the community of San Martin have few other work options than to travel to Managua and work in the free trade zones. Jessica is thankful that her microcredit loan has provided her the opportunity to remain working in her community and has dreams that her children will one day be able to pursue their educations beyond secondary school.

Here’s how I envision it:

  • The non-exponential work (optionally, just saving some money and skipping to #2)
    1. I pay Google (or whoever) for traffic
    2. Google delivers the consumer to my website
    3. I deliver the consumer to the producer
    4. Consumer delivers money to producer
    5. Producer delivers product to consumer
    6. Producer delivers commission money to me
  • The exponential work
    1. I invest profits into microplace (or other micro-lending organizations)
    2. Entrepreneur gets funds and creates or enhances their own business and profit
    3. Entrepreneur pays back interest and principal on the loan to the organization
    4. Organization takes their share of the interest for operating costs and expansion
    5. Organization gives the rest (interest and principal) back to me
    6. I reinvest once again in the organization and more entrepreneurs

Ok, so that was a bit more in depth than you probably needed to see, but it maps out my plan nicely. First, with affiliate marketing, I have the ability to expand a good business rapidly and capitalize on trends in marketplaces where people have money to spend. Next, I reinvest that money into areas that have less money to spend but earning an interest.

There are two criterion which I am simply hoping exist that make this a good transaction for everyone. The first I can control. The second I cannot.

  1. The products or services which I get paid a commission on, and the companies I promote should be honorable and ethical. Without this criteria, I’m just helping move the poverty from one person to another. That’s not helpful.
  2. The entrepreneur should be profitable, over and above the cost of the loan. If they aren’t the purpose of the loan was not fulfilled (to help them get self-sufficient).

A word on making money vs doing good

There seems to be this notion, or itch, that if we were truly doing right in the world to these entrepreneurs, we’d just give them the money or loan it to them with no interest due. Although that seems wonderful and idealistic, there are problems with that notion.

First, it’s very well known that giving money to people, on average, creates social and economic problems – especially if it’s given to people who don’t have a plan already in place on how they will be managing it. There’s the entitlement theory that creeps in and a relaxed (if any) sense of ownership and pride. If you’ve been in a startup before you know how that hunger for success needs to be there. Without it, you’re dead. With it, you’ll grow fast, innovate, own your ideas, and squeeze every bit of value from every penny you have in the bank. Then when you succeed, you feel huge. But the pressure to perform is so much less when we’re just given a million bucks with no necessity to repay. We feel like it’s ours. We can do whatever we want with it, including squander it.

Second, the idea that we shouldn’t make money while we do good things has no foundation. It seems to itch us the wrong way for some reason. However, most of the reasons I’ve heard so far usually have to do with the problem of incentive and motivation. The problem with this thought process is this; If I were only focused on the money, I wouldn’t put it into the micro-finance world. There are much better places to put your money than into micro-lending in terms of ROI. So, if it’s sacrifice you want, consider that those who choose to receive a gain from their assets have other options. Usually they (we) have chosen this route because it’s helpful. The ROI is equal to sustainability and growth.

The crux of the matter always seems to come down to this one question. If I could help one person with $10, wouldn’t it be better to help 99 more people with $1000? If the answer is yes, but you don’t have $1000, how do you get there?

Thus, the plan. Make money you can invest. Invest it letting compound interest work it’s magic.

Now, because of micro-lenders paying back interest, I think we have a better plan. Or perhaps just a different meaning, for “compound interest.”


Nate Ritter lives in the Pacific Northwest (U.S.), popularized the #hashtag and creates web applications for a living. He also does miles and point hacking to enable cheap travel for his family. More here →

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